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How Commodity Price Curves and Inventories React to a Short-Run Scarcity Shock, Nese Erbil, Shaun Roache

Contributor
Abstract
How does a commodity market adjust to a temporary scarcity shock which causes a shift in the slope of the futures price curve? We find long-run relationships between spot and futures prices, inventories and interest rates, which means that such shocks lead to an adjustment back towards a stable equilibrium. We find evidence that the adjustment is somewhat consistent with well-known theoretical models, such as Pindyck (2001); in other words, spot prices rise and then fall, while inventories are used to absorb the shock. Importantly, the pace and nature of the adjustment depends upon whether inventories were initially high or low, which introduces significant nonlinearities into the adjustment process
Table Of Contents
Cover Page; Title Page; Copyright Page; I. Introduction; II. Methodology; III. Data; IV. Accounting for the Persistence of Luck; A. Testing for Cointegration; B. Testing for and Locating Thresholds; C. Adjustment to temporary shocks; V. Conclusion; References; Footnotes
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (49 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9786613882585

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